(Reuters) - Modest growth will keep inflation in check and means the Federal Reserve should ease monetary policy further to bring the rate of unemployment down at a faster pace, a senior central banker said on Wednesday.
Minneapolis Fed Bank chief Narayana Kocherlakota, one of the more dovish members of the Fed's policy-setting committee, also repeated his view that the best way to boost the economy was to lower the Fed's jobless rate threshold on interest rate guidance to 5.5 percent.
"My outlook for unemployment and my outlook for inflation both point to a need for more accommodation than is currently being provided by the FOMC," he said in prepared remarks to local business groups in Edina, Minnesota, referring to the Federal Open Market Committee.
The Fed last week voted to maintain asset purchases at a $85 billion monthly pace until it saw a substantial improvement in the outlook for the labor market, while pledging to hold interest rates near zero until the jobless rate hit 6.5 percent, provided inflation remained under 2.5 percent.
Kocherlakota, who is not a voting member of the policy-setting committee this year, expects the jobless rate to be close to 7 percent by the end of 2014, and forecasts growth around 2.5 percent this year and 3 percent next year.
(Reporting by David Bailey; Writing by Alister Bull; Editing by Neil Stempleman)
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